According to the latest calculations done by Reuters, the value of net short positions on the Greenback was raised from $3.92 billion to $5.32 billion during the week ending on August 1, which is the biggest since May 26.

And here is how positioning activity played out during the week ending on August 1, 2017.

Sentiment on the Greenback continued to sour during the week ending on Aug. 1, since large non-commercial forex traders were likely dismayed when the Fed sounded a bit more dovish on inflation during the July 26 FOMC statement.

Political uncertainty in the U.S. also probably affected sentiment on the Greenback since McCain voted against the GOP’s “skinny repeal” of Obamacare during this period.

Do note, however, that the most recent COT report does not yet show how large players reacted to the upbeat NFP report since that apparently reinforced rate hike expectations, sending USD spot and futures higher.

Also note that while the pushback against the Greenback is still broad-based, positioning activity was actually a bit mixed so demand (or lack thereof) for the other currencies also likely influenced positioning activity.

Okay, here are the major events, reports, and other catalysts for the other currencies:

EUR

Euro bulls continued to unwind their positions while euro bears decided to bump up their positions, interestingly enough.

This bearish positioning activity on the euro is rather strange since economic reports released during the period were actually net positive.

The flash estimate for Euro Zone HICP in July, for example, rose by 1.3% year-on-year, which matched the previous month’s reading. The 1.2% increase for the core reading is even better since it’s already within the ECB’s 2017 forecast.

The probable reason for the bearish positioning activity is that some large players are expecting the euro to fall, given that some market analysts are clamoring that the euro has climbed too far and too fast, and so a correction is not too far away.

GBP

Pound bulls and pound bears reinforced their positions. The bears got more reinforcements, though, so they were able to overrun the bulls, pushing the pound deeper into bearish territory.

This mixed positioning activity on the pound likely reflects conflicting sentiment because of easing Brexit-related worries (at the time) and lowered rate hike expectations after the U.K.’s Q2 GDP failed to impress.

Other than that, positioning activity may also reflect preemptive positioning ahead of the BOE statement. Of course, we now know that the bears won out on that one, even though the BOE tried its best to sound hawkish.

JPY

The yen pushed back against the Greenback some more, as yen bulls added to their bets while yen bears pared some of theirs.

The rather bullish positioning activity was likely due to rising bond prices and plunging bond yields (at the time) because of the FOMC statement. However, it’s also possible that large players took notice when the cBOJ’s summary of opinions, noted that “Although the CPI projections have been lowered, the momentum toward achieving 2 percent is firmly maintained at this point. Thus, additional monetary easing is not necessary and the Bank should maintain the current policy.”

CHF

Non-commercial forex traders became net bullish on the Swissy again, since more Swissy bears were unwinding their positions compared to Swissy bulls.

The reduction in Swissy longs and Swissy shorts likely shows Swissy bulls getting spooked and Swissy shorts taking profits off the table in the wake of the strange yet intense weakness suffered by Swissy spot and futures during the July 24-28 trading week.

Various reasons were cited for the Swissy’s strange weakness, which included monetary policy divergence and SNB intervention, but nobody really knows for sure.

AUD

Aussie bulls added to their positions while Aussie bears only marginally increased theirs.

Interest rate differentials were also likely in play since the FOMC statement lowered expectations of a Fed rate hike, which means that the higher-yielding Aussie will be able to maintain its yield advantage for a little while longer.

Quite interestingly, the most recent COT report already reflects the most recent RBA statement. And it looks like Aussie bulls were not fazed while Aussie bears were not enticed to come out of the woods by the RBA’s jawboning of the Aussie when it said that “The higher exchange rate is expected to contribute to subdued price pressures in the economy. It is also weighing on the outlook for output and employment. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.”

NZD

Positioning activity on the Kiwi was similar to that of the Aussie’s in that there were more fresh Kiwi longs compared to shorts. Unlike the Aussie, however, Kiwi bulls were not too keen to jump in, very likely because the GDT price index fell by 1.6%.

Also, New Zealand’s jobs report was not yet released and forex traders were likely bracing for that. Of course, we now know that it was a disappointment because New Zealand’s jobless rate “improved” from 4.9% to 4.8% in Q2 due to the labor force participation drop deteriorating hard from 70.6% to 70.0%. Also jobs growth was actually negative, printing a 3K decrease in Q2.

CAD

Large players substantially increase their long positions on the Loonie yet again while simultaneously trimming their short positions.

Bullish positioning activity on the Loonie was sustained likely because of the continuing rise in oil prices (at the time), thanks to profit-taking by oil bears, according to market analysts.

Got any other conclusions you can draw from this latest COT Report? Feel free to share your thoughts in the comments section or if you’re looking for further discussion, community member ForExchange has a lively thread called Trading based on Market Sentiment in the forums awaiting your participation.

About Forex Ninja

With a last name like Ninja, I decided long ago to specialize in espionage. And with my first name being Forex, you guessed it, my other pasison was, well, anything and everything FX. Naturally, I decided to combine my two loves into one, "spying" on the forex industry which I call "espipionage." I give traders the inside scoop on developments in the forex industry, such as changing broker regulations, new currency trading products and companies. I also profile existing companies that are making an impact on retail forex traders, all for your benefit. Set your night vision goggles ON. It's Spy Time!

We introduce people to the world of currency trading, and provide educational content to help them learn how to become profitable traders. We're also a community of traders that support each other on our daily trading journey.